Pierre Foods Faces High Leverage, Customer Concentration

Standard & Poor's has assigned a B+ rating to Pierre Foods' $190 million credit facility, reflecting the company's high leverage and customer concentration.

  • 18 Jun 2004
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Standard & Poor's has assigned a B+ rating to Pierre Foods' $190 million credit facility, reflecting the company's high leverage and customer concentration. Pierre distributes fully cooked frozen foods to quick-service restaurants, schools, convenience stores and other customers, but CKE Restaurants accounts for about 24% of the company's sales.

"Whenever you have a high amount of customer concentration it's a concern for your business risk profile," explained Paul Blake, an analyst with S&P. "Too much of the business is dependent on one customer and that customer itself is only rated a single B" (LMW, 5/10). The negatives are partly softened by the company's leading rank in the niche markets and its ability to control raw material costs through cost-plus contracts, S&P adds. Proceeds from the facility, along with $125 million of senior subordinated notes due 2012, will back Madison Dearborn Partners' $420 million acquisition of the company.

There is also concern over the company's long-term growth prospects due to competition, market saturation and consumers' reservations about pre-cooked food, S&P notes. The company's planned capital spending and incremental working capital investment to support its growth plans will result in limited free cash flow available for debt reduction over the next few years, according to Moody's Investors Service. Moody's has assigned a B1 rating to the bank facility. Under the terms of the purchase, if the company achieves $56 million in EBITDA for the 2005 operating year it will make a one-time earn-out payment to its previous owners. S&P also assigned the credit a recovery rating of 3, indicating a 50-80% recovery of principal in the event of default.

Wachovia Securities and Bank of America are leading the credit facility which comprises a five-year, $40 million revolver and six-year, $150 million "B" loan. Both tranches are being talked at LIBOR plus 2 3/4%. Total leverage will be 5.3 times at closing. Pamela Witters, Pierre's cfo, and Madison Dearborn officials did not return calls.

  • 18 Jun 2004

GlobalCapital European securitization league table

Rank Lead Manager/Arranger Share % by Volume
1 Societe Generale 41.30
2 Rabobank 35.35
3 Morgan Stanley 11.45
4 BNP Paribas 5.95
4 Credit Agricole 5.95

Bookrunners of Global Structured Finance

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 16 Jan 2017
1 SG Corporate & Investment Banking 1,260.06 2 126,006,164,037.19%
2 Rabobank 1,081.86 1 108,185,922,974.77%
3 Wells Fargo Securities 430.57 1 43,057,020,785.00%
4 SK Securities 192.86 1 19,286,162,593.99%
4 Meritz Financial Group Inc 192.86 1 19,286,162,593.99%